Investor-State Arbitration Policy and Practice in Australia

Abstract

Australia has 21 bilateral investment treaties (BITs) in force, signed over 1998-2005 mostly with developing or middle-income countries (especially in Asia and Eastern Europe) and all containing ISDS protections, albeit with arguably very limited scope for many treaties signed through to 2002. In ten free trade agreement (FTA) investment chapters concluded and in force since 2003, ISDS is excluded with respect to the United States, New Zealand, Malaysia and Japan, but available under bilateral FTAs with Singapore, Thailand, Chile, Korea and China as well as a regional FTA encompassing all ASEAN member states (including Malaysia, plus three others where ISDS is unavailable under bilateral FTAs or BITs). If the expanded Trans-Pacific Partnership (TPP) FTA signed on 4 February 2016 is ratified by Australia and comes into force, ISDS will also become available with the US and Japan (but not New Zealand, due to a further bilateral Side Letter), as well as with three more states (Canada, Mexico and Peru – although ISDS was available anyway under BITs with the latter two states).

Yet ISDS first emerged in public and parliamentary debates in the lead-up to Australia signing its FTA with the US in 2004, and the official reason for excluding ISDS was mutual trust in each other’s domestic legal systems. However, a few civil society groups had also raised broader sovereignty concerns in opposition to the OECD’s Multilateral Agreement on Investment. Debates intensified from 2010, when Australia joined with the US and now ten other Asia-Pacific economies to negotiate the expanded TPP, and especially since 2011 when Philip Morris Asia launched the first-ever (and still pending) claim against Australia – regarding its tobacco plain packaging legislation, under a 1993 treaty with Hong Kong. As well as opposition to ISDS from the political left, economists in the Productivity Commission were skeptical in a 2010 report into FTA policy, which generally urged Australia to refocus on unilateral and multilateral liberalisation initiatives. In 2011, the (centre-left) Gillard Government Trade Policy Statement largely accepted the Commission’s recommendations, including eschewing ISDS in all future investment treaties – even with developing countries.

Criticisms emerged, as major bilateral FTA negotiations stalled, and after the (centre-right) Coalition Government gained power in 7 September 2013 it reverted to including ISDS on a case-by-case assessment (with bilateral FTAs then concluded with Korea and China, but not with Japan, as well as the regional TPP). However, the Greens party in particular continues to object, initiating an “anti-ISDS Bill” in the Senate in 2014. The Committee recommended against enactment, but ISDS continued to be discussed in other parliamentary inquiries (into ratification of the Korea and China FTAs, Australia’s treaty-making process generally, and the TPP) and in the lead-up to the closely-contested general election of 2 July 2016. Surprisingly, however, there has still been almost no sustained analysis of how Australia’s domestic law protections for (all) investors compare to substantive protections for foreign investors under international customary and treaty law.

Keywords: International economic law, investment treaties, arbitration, dispute resolution, comparative law, Commonwealth law, Asian law, public law, treaty-making, FTAs, BITs, FDI

JEL Classification: K10, K30, K33